If you're new here, this blog will give you the tools to become financially independent in 5 years. The wiki page gives a good summary of the principles of the strategy. The key to success is to run your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. Not just any business but a business that's flexible, agile, and adaptable. Conversely most consumers run their personal finances like an inflexible money-losing anti-business always in danger on losing their jobs to the next wave of downsizing.
Here's more than a hundred online journals from people, who are following the ERE strategy tailored to their particular situation (age, children, location, education, goals, ...). Increasing their savings from the usual 5-15% of their income to tens of thousands of dollars each year or typically 40-80% of their income, many accumulate six-figure net-worths within a few years.
Since everybody's situation is different (age, education, location, children, goals, ...) I suggest only spending a brief moment on this blog, which can be thought of as my personal journal, before delving into the forum journals and looking for the crowd's wisdom for your particular situation.

Personal finance blogs primarily fall in three major categories. First, there are the “getting out of debt” blogs. Second, there are the “just got out of college” personal finance blogs. Third, there are the “career track” personal finance blogs. Of course there are more categories such as retirement blogs or I-won-the-lottery blogs, but these are the biggest.

Drawn below is a graph depicting this triad.

The x-axis shows spending. The y-axis shows earning. The diagonal line shows where earnings are equal to spending. Those who are in debt have been spending more than they have been earning and thus they lie below the diagonal line. “Graduates” (young people) have low earnings but hopefully also low spending. At that point in life there is a tendency to spend as much as one earns since earnings are relatively low. The major group is what I for lack of a better word call the career track blogs. Here spending is 15% below earnings. This track is continued for 30-40 years as earnings and spending get progressively higher as a roughly constant margin for the retirement plan is retained. Since one particular blog shows a snapshot in time of a person’s finances, plotting all the bloggers at one time reflect the typical financial path taken by a person in our society. It looks like this. If there are any amateur astronomers reading this just think of the similarities to the typical evolution of a star on a Hertzsprung-Russell diagram. No, there is no hidden cosmic significance here 😉

A person in this diagram may start in debt or at the spending=earning line. As earnings go up savings are gradually increased to 15% at which point they are held constant. As earnings keep going up spending is adjusted accordingly. After 30 or 40 years, the person retires with a modest drop in spending (no cafeteria lunch and no commute).This path is how most people think when it comes to personal finance. Other paths may sound strange or even impossible.Here are some other paths. That hopefully puts everything in perspective.

It is seen that the typical path above is just one of several possible path. The typical path corresponds to going into student debt, then getting a career for 30-40 years eventually paying off the debt and accumulating a large amount of money (ideally 1-2 million dollars in retirement funds) and then retiring at a high spending level which little concern for how the money is spent.Early retirement can be reached through perhaps modest student debts but saving substantially more at a rate of 30-50% for 15-20 years at which point early retirement is possible at age 40-50. This does require some budget control to carry through.Extreme early retirement is reachable with even smaller student debts (or perhaps no student debts) and saving 50-80% for 5-10 years. This makes it possible to retire between ages of 30 and 40. This requires substantial money management and frugality skills.The two conclusions to be drawn here is that by observing a large group of personal finance bloggers one can get an idea of how a person (a blogger to be exact) typically behaves over a lifetime. One the other hand one should also study “strange” blogs to see what other paths are possible.

27 users responded in " What people ought to know about the different kinds of personal finance blogs "

I have enjoyed reading your blog. It does seem that most blogs talk about getting out of debt. I have been able to save at least 15% of my earning since I left college. I now save over 30% of our income for investing. My blog falls in the category of investing for people who have been able to save some extra money. I am on the early retirement track but I have two big issues that will not allow me to retire before 60, young children and paying for medical coverage.

As an economists, I am impressed. Nice way to explain the situation on the blog world or sphere. I was thinking of some bias existing in blogs which is somewhat related to your post so here is an idea of self reported wealth on personal finance blogs. For some blogs that have a geographical area associated with the blog where the Schiller index for housing is crashing down and while the financial market has low or negative returns, the wealth factor of self reported value goes up or is maintained! This self reporting bias is evident and as a lifelong student of bias I find the information of interest. To me, one of the issues one must face is decision bias to make better decisions and accurate reporting/scorecard is a method to check bias with evidence. Perhaps I will classify personal finance blogs with a cognitive dysfunction.

Well, I’m thinking you’d put me in the “just graduated” collection of blogs. I’m not really in the “get out of debt” group, except that I am in debt…but it’s not credit card/car loans/etc. debt like a lot of those blogs, it’s student loans debt.
And yes, debt is debt, but I guess it’s not that I was overspending like a fiend, I was just borrowing to go to college.

imho this is your best post yet. I think I fall into the “late retirement” category because I do plan to work until I’m at LEAST 57 (my 100% income replacement crossover) but most likely until 62. The catch is that I have started saving young enough and in large enough amounts that I will have amassed a huge amount of wealth ($12-15 million). I will be free to spend significantly more at age 57+ then I do during my career.

My goal is to maximize my lifetime financial potential. Literally I will spend as much as I can (and have as much fun as I can) between now and when I die. That of course requires investing now for maximum spending later. I think I’ve picked a plan that is the best route to achieve my goals (at least for me). Sitting around with nothing to do is not for me. 🙂

Jacob said,

@simplicity in kansas – I think one factor that keeps net worth from going down during downturns is that people keep adding savings. Personally I am breaking just about even e.g. portfolio drop for 2007 equals my savings resulting in no change in net worth. Those how have a higher net relative to earnings have seen a drop wheres those with high earnings relative to net will usually see their net increase at all time thus appearing very successful. Of course then there’s the fact that not every blogger reports earnings and spendings (or net). Also not every person blogs.

@adfecto – heh, I bet that’s because you don’t disagree as much as usual in this case 😉 It’s interesting that you approach it as an optimization problem. This lead my to consider what I have been optimizing. I think the answer is independence or self-sufficiency.

Hannah said,

@Adfecto
“Sitting around with nothing to do is not for me.”

This assumes that there is “nothing to do” when one is not at work performing their job. Which is a rather dire way of looking at leisure time! If anything, wouldn’t you want to retire earlier on less, since even half of the projected 12-15 million should be sufficient to provide a very comfortable lifestyle? It would mean more years to enjoy “doing your own thing.”

As for me, I am currently 21 and starting out with nothing (zero inheritance, saved wealth, or financial/familial safety net). I plan on aggressively investing the bulk of my income, and retiring in my late 30s on approximately 500,000 in investments to support a very simple, frugal, minimalist lifestyle. I know, sacrilege! But what can I say: I’m an extremist when it comes to my worship of my leisure time. I only have approximately 40-50 more years on earth after that, if I’m lucky, and you know how life is… it’s short. And I’ve made my peace with that. The point is, my FI style is more about aggressively maximizing my Time rather than my Investment Income. There is a distinct point (early on, as you can see) when I want to “cross over.” I want to use that free time to explore ideas and philosophies, learn about human history and different cultures, create art, appreciate other people’s art, go to museums, read the canon of literature’s Great Books (a big one for me, because I love to read), enjoy films, take bike rides, hang out at the beach, spend an idle evening cooking and entertaining guests, volunteer for causes I believe in, etc. etc. Goodness, talk about nothing to do, there’s too much to do! What pains me is that there isn’t more time to do it all, and that I don’t have FI now.

Sitting around spending the majority of my life working, accumulating more money than I really need, that’s not for me.

Steve Austin said,

I have to chuckle (at myself). I started out (around 23 or 24) with the same opinion as Adfecto. I distinctly recall saying to myself and others: “I’m the type of person who doesn’t mind working, and can see myself working past 70.” But now (38) I have done what Hannah says she will do by her late 30s. I think we have to imagine that a person (e.g. Adfecto) can and may *change* her/his mind. I hope to see Hannah stick to her guns though, because what she proposes is both doable and admirable.

Thrifty Canadian said,

@Steve
Very interested in how you changed and how hard you think the change was. Stuff like convincing spouse is more difficult than changing life style I suppose. You want to share with us in a guest post, since you now “Sitting around with nothing to do “?

Steve Austin said,

Canada, it was an easy gradual change from about age 31-36. Probably nothing that rates a guest post.

Jacob said,

@Steve – I’m also interested. I find this anything but easy. I’ve probably been too institutionalized. DW actually seems to be more accepting of my ER than I am.

Hannah said,

@Steve – Thank you for the encouragement 🙂 I too would like to hear your story about how you achieved FI. Real life examples always make the dream seem that much more tangible!

It’s funny, reading over my post I come off as obnoxiously idealistic! Haha. But my life has been anything but.. I grew up in the foster care system and went through a period of homelessness in my late teens after “aging out” with no financial or familial safety net. This was a period when I had a bit of a “wake up call” regarding the nature of money, employment, society, consumerism, financial literacy, financial independence, mortality, self-perception and how it all ties into determining the quality of our lives. In short, my unusual circumstances forced me into a position of taking a good hard look at my priorities and circumstance, and figure out what I truly valued in life.

I think the defining aspect of my personality is that I am simultaneously a romantic and a realist. I have a bit of an “English major temperament” 😉 which explains my fanatic worship of Time as a means to simply contemplate and appreciate life. I am also an INTJ and have strong tendencies toward questioning herd mentality and being skeptical. This, coupled with a penchant for planning ahead, and facing up to economic reality, also makes me a realist.

I know that only time will tell if I indeed “stuck to my guns” but I truly believe that, on many levels, FI is not simply a means to an end but a worthy challenge… a lifestyle, in fact. It’s sort of like an exclusive game, where entry is admitted to those who exhibit unusual levels of endurance, self-control, and patience. Part of the fun is testing out one’s own willpower!

Nice post – I am definitely a niche investing blog that focuses on retirement planning or living off your income producing assets.
I do have a several decades before I retire however ( I’m still in my 20’s(

really cool graphs, there!:) I’m wondering where my blog would fall on that. I’m definitely not a “getting out of debt” blog, and while I’ve already graduated my Bachelor’s I’m doing grad work, so I’m somewhere between the college student and the “career track” blogs, I guess. My blog is 40% pf, 25% investment, 20% personal development… I’ve read some of your posts before, but have just recently come back to your site again. Subscribed. I’ll definitely be reading more!

[…] I’d buy him a beer or two. I got the idea for this post from Early Retirement Extreme’s What You Need To Know About The Different Kinds of PF Blogs and the graphical presentation. Since I would probably fall into the Career Track classification, I […]

Concojones said,

I discovered the notion of ER a year or 3 ago, shortly after graduation. Being European (ER is an American thing IMO), the idea was totally new to me but very exciting. My first goal was like 3-4 million – say, “Adfecto” style retirement. Just like Steve I’ve come to change my mind and I credit this blog for that. These days I’m thinking a few 100k (as far as I’m concerned) to 1M (for a future family). I’m now 28 and I hope to be there by 40.

That said, I hope I’ll love what I do so much that I won’t want to retire at 40, but it’s good to have a choice. I do know I’ll want to spend time with my future kids (more than my own dad did).

Concojones said,

Forgot to add my savings rate is 50% (of net income). Basically, for every dollar you spend, you put one aside. This seems like a good balance to me: frugal but not obsessive (obsessive in the sense that I wan’t to delude myself into thinking life will be better after retirement).

Very nice. The aspect I have encountered much in the rural area is seasonal work whether it be farming, Alaska fishing, or in the forest. Work your butt off for a few months and take a season off. Small retirements throughout one’s lifetime. I have done this and like it. The time off and fun gives rejuvenation to go at it hard again.

blah said,

I am curious how much of the overall US population constitutes the middle class. I ask this because this article did a good job of categorizing the classes of PF blogs targeting the middle class, but I wonder, how many people are considered poor and so just live paycheck to paycheck and how many people are so rich that money is just numbers and games. I know that the rich are in the minority, but i wonder how many middle class there are that fit the typical description here vs how many poor who life like the college student their whole life. I know around the world answers would vary widely, but what about here? Is there a reliable consistent source for that? I am confused, because whenever I academically read statistics put out by the census bureau or other government agencies, it appears to me that the number of poor listed is much less than what I experiencially see around me in the world as I go about my daily life. I wonder if it is because of the places I have traveled or where I have lived, but
I have done a ton of travelling in my life and have seen more of it in the places I have gone than the statistics seem to indicate.
The reason I point this out is because I wonder how typical the typical PF blog is, vs is it just that those type of people read PF blogs, ie, people who are way thrifty either by choice or by circumstance, would not tend to read the average PF blog to start with either because it is unenlightened or well, because it is totally in a different financial world to theirs depending on which group of frugal you are talking about.

Jacob said,

@blah – I can’t comment of statistical data or official numbers. However, pf bloggers seem to have a WAY better understanding of personal finance than the average person. I used to think that having saved 100k before age 30 (before most people have serious income) was unique/remarkable, but for many pf bloggers this is more the rule than the exception.

PS: This was my understanding four years ago when there was still only about 100-200 pf blogs. Now there’s close to a thousand, so this ‘rule’ may no longer hold.

Extremist here. I’m saving over 80% of my income and hope to be able to retire within two years. I don’t know where I fit on your personal finance blog graph. By title, my blog focuses on just graduated… yet I’ve often struggled with that b/c very few twenty-somethings are thinking about early retirement and its a passion of mine. You’re not the only one who struggles with the name of their blog, Jacob. At least you’re in the ballpark.

My philosophy comes down to this: you only live once and I can’t imagine ever laying my deathbed wishing I had worked more hours or climbed higher on the company ladder. I can imagine wishing I had spent more time with family, friends, and doing the things I loved.

I have to add one more. I have been home sick for the last couple of days. Days of medicine and being in my chair to recover has allowed time to catch up on the financial blogs. I am amazed how many coupon/free deal blogs there are. And what store has what price. Since my way of doing things tends to keep me OUT of stores they are not something I would follow but they do seem very popular. I guess I would refer to them as Discount Consumerism blogs.

andy said,

Hi also from Kansas!

I just want to add that I think it’s funny that people come to this site, and comment about how they won’t retire early, or don’t see the point in retiring early, and flaunt the fact that they will have mega millions when they retire / live a “more fulfilling life”.

I think the blog and philosophy behind ERE is flying straight over their heads.

I think this is an excellent (yet simple) graphical illustration of the concept of early retirement. There are a lot of people that learn better from a visualization and this may help some understand it better.

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